PART A: Prepare current tax worksheet (10 MARKS)

You have been asked by the management of ABC Ltd to assist with the preparation of the income tax entries for the year ended 30 June 2020. The company reported a profit before tax for the year to 30 June 2020 of $900000.

Additional information

(a) Interest revenue of $10000 is included in the profit for the year to 30 June 2020; and the total amount of cash interest received this year is $20 000.

(b) Expenses included in profit for the year to 30 June 2020 are as follows:

depreciation expense for plant $50000

doubtful debts expense $25000; the bad debt written-off is $15 000 this year.

warranty expense $36000; the warranty paid is 50 000 in the current period.

(c) Accumulated depreciation on plant for tax purposes is $300000 on 30 June 2020 and $150000 on 30 June 2019. There have been no acquisitions or disposals of plant during the current year.

(d) The corporate tax rate is 30%.

Required

Complete the current tax worksheets of ABC Ltd and prepare the tax entries for 30 June 2020.

PART B: Prepare income tax adjustment for the following items (15 MARKS)

1)T Limited accrued $10,000 interest revenue in the year ended 30 June 2020. This item will not be taxable until it is received in the following financial year. If the company tax rate is 30%. What is the tax effect adjustment on 30 June 2020?

2)B Limited had the following deferred tax balances at reporting date:

deferred tax assets $10,000

deferred tax liabilities $25,000

Effective from the first day of the next financial period, the company rate of income tax was decreased from 25% to 20%. What is the tax effect adjustment to recognise the impact of the tax rate change?

3)The following information was extracted from the financial records of ABC Limited: equipment purchased on 1 July 2019 for $200 000 (accounting depreciation 10% straight line; tax depreciation 20% straight line). If the company tax rate is 30%, what is the deferred tax item that will be recorded by ABC Limited at 30 June 2020 ?

4) XYZ Limited adopted tax effect accounting during the current financial period. When estimating the balance date adjustments at the end of the financial period the following information was determined: current tax liability $12000; deferred tax liability increased by $15000; deferred tax asset increased by $18000. Show your calculation to determine the amount of total income tax expense recognised by the company in the current period.

5) The company's provision for long-service leave at the beginning and end of the year are $160 000 and $150 000 respectively. In the current year, $20 000 in long-service leave was paid to a long-standing employee. The company tax rate is 30%. Prepare the end-of-period adjustment journal entries for the deferred tax account in relation to the above situation.